Delisting of Equity Shares: formula sheet

Key formulas

SCRA Section 21A(1): power to delist

Recognised stock exchange may delist securities, after recording reasons, on prescribed grounds

Proviso: no delisting unless the company has been given a reasonable opportunity of being heard.

SCRA Section 21A(2): appeal

Appeal to Securities Appellate Tribunal within 15 days of the exchange's decision

Can be filed by the listed company or an aggrieved investor. SAT may allow a further period not exceeding one month if sufficient cause prevented filing in time.

SEBI Act Section 12A: prohibitions

No person shall, directly or indirectly, use manipulative or deceptive devices, defraud, engage in insider trading, deal while in possession of material or non-public information, or acquire control beyond the permitted limit

Applies to securities listed or proposed to be listed on a recognised stock exchange. Clauses (a) to (f).

SCRA Section 12A: SEBI directions

After inquiry, if satisfied it is necessary, SEBI may issue directions in the interest of investors or orderly development of the securities market

Can include disgorgement of wrongful gain made or loss averted. Note this is Section 12A of the SCRA, not of the SEBI Act.

SCRA Section 31: regulations

SEBI may by notification make regulations consistent with the Act and its rules to carry out its purposes

Regulations must be laid before Parliament.

Shareholder approval

Public shareholders' votes in favour ≥ 2 × public shareholders' votes against

Special resolution through postal ballot and e-voting. The two-times test applies to votes cast by public shareholders.

Success threshold

(Promoter and acquirer holding + shares accepted in offer) ÷ Total share capital × 100 ≥ 90

Total share capital as per the regulations. Both the 90% test and the minimum public participation test must be met.

Shares needed to reach 90%

Shares required = 90% × Total shares − Existing promoter and acquirer shares

Use this first in numerical questions. It tells you how many shares must be tendered.

Discovered price (reverse book building)

Lowest bid price at which cumulative shares tendered (from the lowest bid upward) ≥ shares required

Sellers accept any price at or above their bid, so add up bids from the lowest price upward.

Consideration payable

Exit price × Number of shares accepted

The acquirer pays the exit price to all who tendered at or below it.

Penalty for breach of delisting conditions (SCRA s. 23E)

Not less than ₹5,00,000; may extend to ₹25,00,00,000

Applies to a company that fails to comply with listing or delisting conditions or grounds.

Power to delist (section 21A(1), SCRA)

Recognised stock exchange + recorded reasons + prescribed ground = delisting

The grounds are prescribed, not listed in section 21A. Reasons must be recorded.

Hearing safeguard (proviso to section 21A(1))

No delisting without a reasonable opportunity of being heard

Applies to the company concerned. Failure to hear makes the decision open to challenge.

Appeal period (section 21A(2))

Appeal to SAT within 15 days of the decision

The proviso lets SAT allow the company, if prevented by sufficient cause, to file within a further period not exceeding one month.

Who can appeal (section 21A(2))

Listed company or aggrieved investor

Both can appeal, not only the company.

Procedure for appeals

Sections 22B to 22E of SCRA apply as far as may be

These sections govern the appeal procedure before SAT.

Relisting bar after voluntary delisting

Earliest relisting = date of delisting + 5 years

Relisting is through a fresh public issue as per the SEBI issue rules. Confirm the exact regulation text in your study material.

Relisting bar after compulsory delisting

Earliest relisting = date of delisting + 10 years

Compulsory delisting carries the longer bar.

Section 15H penalty

Minimum ₹10 lakh; maximum = higher of ₹25 crore and 3 × profits made from the failure

Covers failure to disclose holdings, make a public announcement, make a public offer, or pay consideration.

Section 15HA penalty

Minimum ₹5 lakh; maximum = higher of ₹25 crore and 3 × profits made from the practice

For fraudulent and unfair trade practices relating to securities.

Section 23E SCRA penalty

Minimum ₹5 lakh; maximum ₹25 crore

For breach of listing or delisting conditions. No profit-based limb.

Section 21A appeal

Appeal to SAT within 15 days; further period up to 1 month if sufficient cause

Delisting needs recorded reasons and a reasonable opportunity of being heard first.

Quick revision

• Delisting is the permanent removal of a company's securities from a recognised stock exchange.
• The two routes are voluntary delisting and compulsory delisting.
• Voluntary delisting is initiated by the promoter or acquirer through an exit offer to public shareholders.
• Compulsory delisting is ordered by the stock exchange for non-compliance.
• SEBI may specify listing requirements and the transfer of securities under section 11A(2) of the SEBI Act.
• Section 12A of the SEBI Act prohibits manipulative and deceptive devices and insider trading in listed securities.
• Section 15H of the SEBI Act is a takeover provision: it penalises non-disclosure of acquisition of shares and takeovers.
• Section 15H applies where a person fails to disclose aggregate shareholding before acquiring shares, make a public announcement at a minimum price, make a public offer by letter of offer, or pay consideration to shareholders who sold under the offer.
• The section 15H penalty is at least ten lakh rupees, up to twenty-five crore rupees or three times the profit, whichever is higher.
• Do not present section 15H as the delisting penalty. Delisting-specific consequences come from the SEBI delisting regulations and the general penalty provisions.
• Always state the process in order: approval, offer, price discovery, outcome.
• Check the latest SEBI delisting regulations for exact numbers before the exam.
• End every answer with a conclusion that applies the rule to the facts.

Common mistakes

• Mixing up Section 12A of the SEBI Act with Section 12A of the SCRA. Fix: Remember: SEBI Act 12A is the prohibition on manipulative devices and insider trading. SCRA 12A is SEBI's power to issue directions.
• Saying the company can be delisted without a hearing. Fix: Always mention the reasonable opportunity of being heard and that reasons must be recorded.
• Adding bids from the highest price downward Fix: In reverse book building sellers name their minimum price. Accumulate from the lowest price upward and stop when the shares needed are reached.
• Treating 90% as 90% of public shares Fix: The 90% is of the total share capital, counting the promoter and acquirer's existing holding plus the shares accepted.
• Saying the grounds for delisting are listed in section 21A. Fix: Write that section 21A allows delisting on grounds prescribed under the Act. Name grounds only as examples from your study material.
• Forgetting the hearing requirement. Fix: Always add: no delisting without a reasonable opportunity of being heard.
• Mixing up the 5-year and 10-year relisting bars. Fix: Link 5 years to voluntary and 10 years to compulsory delisting. Compulsory is the stricter case, so the longer period.
• Stating the Section 15H maximum as only ₹25 crore. Fix: Always write: higher of ₹25 crore or three times the profits made from the failure. Compute both.

Exam tips

• Write the section number for every point, and name the Act. Examiners reward the provision-analysis-conclusion pattern.
• Keep Section 12A of the SEBI Act and Section 12A of the SCRA clearly separate in your answer.
• In short notes, give meaning, types, source of power and safeguards in that order.
• Do not quote regulation numbers or pricing figures unless you are certain; describe the rule in plain words instead.
• Link this topic to the voluntary and compulsory delisting topics so your answer shows how the framework works in practice.
• Write the procedure as a numbered sequence. Examiners reward the right order: board, special resolution, exchange approval, public announcement, reverse book building.
• Always mention the two-times vote test for public shareholders. It is the point most often missed.
• In numerical questions, show the shares-needed line and the cumulative table. Marks go to method even if the arithmetic slips.